The Caribou Pipeline Company projects a pattern of inflows from the investment shown in the following table. The inflows are spread over time to reflect delayed benefits. Each year is independent of the others. Year 1 Year 5 Year 10 Probability 0.20 0.60 Cash Inflow Cash Inflow 20 Probability Cash Inflow 35 Probability 55 0.20 0.40 70 0.20 0.40 70 0.40 70 0.20 95 0.40 105 The expected value for all three years is $70. 6. Compute the standard deviation for each of the three years. (Round the final answers to 2 decimal places.) Standard deviation Year 1 Year S Year 10 b. This part of the question is not part of your Connect assignment. c. Assuming a 6 percent and 12 percent discount rate, complete the table for present value factors. (Round the finel answers to 3 decimal pleces. Year PVISPercent PVIF 12 Fercent Difference 0.943 0.893 10
The Caribou Pipeline Company projects a pattern of inflows from the investment shown in the following table. The inflows are spread over time to reflect delayed benefits. Each year is independent of the others. Year 1 Year 5 Year 10 Probability 0.20 0.60 Cash Inflow Cash Inflow 20 Probability Cash Inflow 35 Probability 55 0.20 0.40 70 0.20 0.40 70 0.40 70 0.20 95 0.40 105 The expected value for all three years is $70. 6. Compute the standard deviation for each of the three years. (Round the final answers to 2 decimal places.) Standard deviation Year 1 Year S Year 10 b. This part of the question is not part of your Connect assignment. c. Assuming a 6 percent and 12 percent discount rate, complete the table for present value factors. (Round the finel answers to 3 decimal pleces. Year PVISPercent PVIF 12 Fercent Difference 0.943 0.893 10
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The Caribou Pipeline Company projects a pattern of inflows from the investment shown in the following table. The inflows are spread
over time to reflect delayed benefits. Each year is Independent of the others.
Year 5
Year 1
Cash Inflow
Year 10
Probability
Cash Inflow
Probability
Probability
Cash Inflow
35
55
0.20
20
0.20
0.40
70
0.60
70
0.40
70
e.20
85
0.20
95
0.40
105
0.40
The expected value for all three years is $70.
6. Compute the standard deviation for each of the three years. (Round the final answers to 2 decimal places.)
Standard deviation
Year 1
Year 5
Year 10
b. This part of the question is not part of your Connect assignment.
c. Assuming a 6 percent and 12 percent discount rate, complete the table for present value factors. (Round the final answers to 3
decimal places.)
Year
PV 6 Percent
PVIF 12 Percent
Difference
0.943
0.89)
0.050
10
d. This part of the question is not part of your Connect assignment.
e-1. Assume the initial investment is $130. What is the net present value of the expected values of $70 for the investment at a 12
percent discount rate?(Round "PV Factor" to 3 decimal pleces. Negative answer should be indicated by a minus sign. Do not round

Transcribed Image Text:e-1. Assume the initial Investment is $130. What is the net present value of the expected values of $70 for the investment at a 12
percent discount rate?(Round "PV Factor" to 3 decimal places. Negative answer should be indicated by a minus sign. Do not round
Intermediote colculations. Round the final answer to 1 decimal place.)
Net present value
e-2. Should the investment be accepted?
ONo
O Yes
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